How an Engineer Created a Multi-Billion-Dollar, Unprofitable Business | The Story of Ozon

Topic of the Episode: How a Fantasy Hobby Made Ozon a Russian E-commerce Giant [00:00]

• Ozon, a major Russian marketplace, was built by founders who took the best from the West and created a unique platform, despite facing significant losses and controversies [00:00]
• The company's success is attributed to the founders' early interests: Dmitry Rudakov's passion for fantasy books and systematic organization, which translated into building a large-scale company in the internet era [00:41]

From Aviation to Technical Revolution: How Ozon's Founders Met [01:14]

• Ozon's co-founders, Alexander Egorov and Dmitry Rudakov, met at the Leningrad Institute of Aviation Instrumentation, graduating from the automated design systems department [01:14]
• After realizing aviation wasn't their path, they sought opportunities in other fields, leveraging their skills in the burgeoning telecommunications sector of the early 1990s [01:14]
• Egorov, Rudakov, and a third co-founder, Viktor Kozlov (who later left Ozon), established Soft, a web development company focused on foreign clients, which quickly became profitable due to high demand and currency exchange rates [01:55]

What a Business for the Soul Can Lead To [02:19]

• Soft's success allowed the founders to earn significant income in foreign currency, leading them to explore opening a second business, this time driven by passion [02:19]
• They chose between selling car parts or books, ultimately selecting books due to Rudakov's father's suggestion and his personal passion for fantasy literature, which led him to create a detailed bibliographic database [02:54]

How Ozon Got Its Name and Its Connection to Amazon [03:22]

• In 1996, the publishing house Terra Fantastica launched a bookshop website, with Soft developing its online database and illustration system [03:23]
• The website was completed in three months and later integrated payment capabilities, primarily serving Russian-speaking expatriates due to the lack of online payment infrastructure in Russia at the time [03:23]
• The service was named Ozon, inspired by Amazon, but the initial 'A' was later changed to 'O' due to user confusion and the association of ozone with a light gas of life in chemistry [04:03]
• Ozon officially launched on April 9, 1998, initially selling books, video cassettes, and later music CDs, experiencing immediate order influx [04:03]
• The 1998 Russian financial crisis (Black Tuesday) led to the bankruptcy of Terra Fantastica, but Soft, focused on Western clients, benefited from the currency devaluation, allowing them to acquire Ozon's website [04:30]
• By November 1998, Ozon set a record for orders and increased turnover to 200,000 rubles, and by 1999, it had 10,000 registered users [05:29]

What Opportunities Did the 90s Crisis Provide? [04:31]

• The 1998 default crisis, while devastating for many Russian businesses, unexpectedly benefited Soft due to its focus on Western clients and the resulting currency exchange rate surge [04:31]

Why Bankers Didn't Believe in the Online Store [05:37]

• Despite Ozon's growth, banks dismissed the idea of an online store as unrealistic, refusing loans and investments [05:38]
• In 1999, Ozon was spun off from Soft into a new legal entity in Cyprus, and shortly after, they secured venture capital funding after numerous investor meetings [06:21]

Investors Leave the Company: Conflicts and Misunderstandings [06:30]

• Runet Holdings became Ozon's first investor, acquiring a full stake for $1.8 million, with additional promised investments from business angels [06:30]
• Investor Leonid Boguslavsky was initially skeptical of Ozon's business prospects, similar to his view on Yandex at the time, though both later became highly profitable for his fund [06:30]
• Conflicts arose between investors and founders over business strategy, including a controversial $300,000 advertising campaign and disagreements on business model changes, such as merging with catalog-based companies and improving delivery logistics [07:10]

Why the Founders Decided to Sell Their Stakes in the Company [07:57]

• Due to escalating disagreements and pressure from investors like Runet Holdings, who wanted to change the business model and improve delivery, Soft and its owners decided to sell their remaining shares [07:58]
• The founders, Rudakov and Egorov, left Ozon at a time of significant growth, later stating they did not regret their decision, as they were financially compensated and found retail not aligned with their long-term professional goals [08:59]

Where Did the Ozon Founders Go? [08:59]

• After leaving Ozon, Rudakov and Egorov focused on developing Soft, which grew significantly, undertaking projects for major companies like O'Key, Rostelecom, Gazprom, and others, reaching revenues of over 6.5 billion rubles by 2025 [09:50]

How Ozon Has Changed Since the 2000s [10:30]

• Under new management, Ozon expanded rapidly, launching electronics sales and delivery to 400 cities in 2001 [10:31]
• Key developments included opening a Moscow office and warehouse with a courier service (2000), introducing mobile phones (2005), clothing and home goods (2007), and launching Ozon Travel (2009) [10:31]
• Ozon also introduced a footwear section (2011) and launched its own home appliance brand, Tuvla, in 2013, offering thousands of products [11:09]

What Ozon Actually Earns On [11:30]

• In late 2013, Ozon's owner, Baring Vostok, sought a buyer for its stake, which was acquired by AFK Sistema and MTS in 2014 for $150 million [11:28]
• By 2018, MTS invested an additional 1.15 billion rubles [11:30]
• Ozon transitioned to a marketplace model around 2018, similar to Wildberries, earning revenue from direct sales and commissions (3-15%) from third-party sellers, as well as paid promotional tools [11:30]

50 Billion Ruble Loss: Why Owners Are Not Worried [12:30]

• Despite a significant loss of over 50 billion rubles in 2024, placing it among the most unprofitable companies in Russia, Ozon's owners are not concerned due to substantial investments in development and infrastructure [12:30]
• Major expenses include marketing (49 billion rubles in 2024) and increased credit interest payments (from 18 to 56 billion rubles) [12:30]
• The company boasts extensive logistics infrastructure with over 170 sorting centers and 65,000 pickup points, having tripled its logistics capacity in two years to over 3.6 million square meters [12:30]
• The financial director anticipates profitability within 2-3 years [13:12]
• Venture investor Alexander Chachava became a co-owner, acquiring a 27% stake in Ozon through his structure O-23 [13:29]

Who Bought Ozon Literally a Few Days Ago [13:30]

• Alexander Chachava, a prominent Russian venture investor and founder of Leta Capital, acquired a significant stake, becoming a major co-owner [13:30]

Going Public and Creating a Bank: What's All This For? [14:01]

• Ozon went public on both the New York and Moscow stock exchanges in 2020, raising $1.2 billion with initial stock value increases [14:02]
• In 2021, Ozon acquired O'Key's banking unit, O'Bank, for 615 million rubles, and launched its own bank, EcomBank, in March 2022 [14:02]
• The bank aims to enhance customer experience through discounts, cashback, simplified transactions, and financial products for businesses, while also reducing acquiring commissions and gaining a competitive edge [14:02]

Ozon vs Wildberries: Who is Stronger [15:20]

• Ozon leads significantly in financial services (FinTech) and advertising services compared to Wildberries [15:21]
• Ozon also operates a network of 350 ATMs in major cities, planned for installation in pickup points, shopping centers, and stores [15:21]
• In 2024, Ozon delivered 1.4 billion orders to 50 million customers, with over 600,000 sellers and more than 250 million products [15:21]
• In April 2025, Ozon became a sponsor of FC Krasnodar, with the stadium renamed Ozon Arena, which led to humorous reactions from the football community [16:00]

Ozon Official Partner of FC Krasnodar [16:20]

• A post-game social media post from the football club Rubin sarcastically reviewed the stadium as a pickup point, highlighting issues and a one-star rating [16:21]

What is the Secret to Ozon's Success? [16:50]

• Key success factors include a wide assortment and fast delivery (1-2 days, some within 15-30 minutes) [16:51]
• Significant investments in logistics have built one of Russia's largest networks of warehouses, sorting centers, and pickup points [16:51]
• The development of a marketplace model attracted hundreds of thousands of sellers, transforming Ozon into a platform [16:51]
• A strong focus on technology, including process automation, smart recommendations, and scalable IT infrastructure, has accelerated growth [16:51]
• Financial and ecosystem services (from Ozon Card to advertising and seller loans) have increased user and partner engagement [17:31]
• The combination of technology, large-scale logistics, and an ecosystem approach has positioned Ozon as a leader in Russian e-commerce, building infrastructure for businesses and simplifying online shopping for millions [17:31]

Episode Summary [17:52]

• Ozon continues to focus on its growth strategy, aiming to provide infrastructure for businesses and convenient online shopping for consumers [17:52]